Budget season is upon us. Finalizing your credit union’s spending plans is a de facto endorsement of where your financial institution will set its priorities for the coming year. And, competing priorities mean it can be tricky to keep each department happy while still providing your members with the exceptional service and products they expect.
To make it all work, communication and team buy-in are essential. Strategic planning and forecasting are vital. Budget cuts are inevitable. Or are they?
Chances are, there’s room for reallocation in your credit union’s accounting books — especially if you’re enrolled in a traditional fully insured health care plan.
First, Align Your Budget with Business Priorities
Ideally, an annual budget isn’t just another administrative task; it’s an expression of your overall strategic planning process. Financial allocations should be based on your credit union’s long- and short-term objectives, so allow enough time in your budget cycle for data analysis and strategic decision-making.
It’s also important to study how well your priorities have aligned with previous budget allocations. Examining financial data from previous years can reveal historical shortfalls and provide clues so you can avoid repeating past mistakes.
Finally, your budget is a strategic asset to every department in your credit union, so buy-in and ownership are vital to success. Communicating goals, being transparent, and getting input from managers and team leaders at all levels help improve accuracy, increase understanding, and empower teams to act in your credit union’s best interests.
Remember: New and Ongoing Initiatives Need Funding
It’s an exciting time for growth-minded credit unions. The door is open to attract new members eager to work with financial institutions committed to innovation. A survey by digital consultancy Mobiquity found that 40% of respondents were likely to change their primary financial institution for a better digital banking experience. But innovation takes funding — and dedicated employees to bring it to life.
That’s why ongoing efforts like improving employee retention shouldn’t have to compete with new initiatives, such as developing a cryptocurrency strategy or exploring the impact of the metaverse. There’s a lot going on as financial institutions embrace the digital future. You just need the funding to make it happen.
Evaluate Areas of Wasteful Spending
A simple and relatively painless way to save money is to examine areas of wasteful spending and change habits accordingly. For example, look at subscription levels for underutilized software or mishandled marketing dollars.
Additionally, many standard monthly bills, such as telecom, utilities, data storage and even waste disposal, can be substantially lowered by negotiating rates or looking for new providers.
Such common-sense tactics will help you make a dent in wasteful spending, but for a crater-size impact, don’t overlook one of your credit union’s greatest annual expenses: employee benefits.
Our research shows that most credit unions overpay for employee benefits to the tune of 25% or more. That means a credit union with 100 employees could potentially free up more than $200,000 a year by reexamining its approach to employee benefits.
That kind of money would go a long way toward improving your annual budget planning process.
How to Find Money and Fortify Next Year’s Budget
Analyzing your employee benefits program for wasteful spending does not mean downgrading benefits — most employees value a robust benefits package over an increased salary. But high costs and high quality don’t have to go hand-in-hand. It’s possible to reduce your benefits spend without sacrificing excellence.
One option is to shift to a self-insurance benefits model. Self-funding can free up money your credit union would otherwise spend on healthcare expenses without reducing plan quality or employee satisfaction.
Download now: The Credit Union Executive’s Guide to Improving Retention With Employee Benefits
Self-insurance, also known as self-funded health insurance, uses a trust funded by company and employee contributions to pay for employee healthcare costs. Instead of paying standard monthly premiums to insurance providers regardless of actual claims cost, self-funded credit unions save money by paying claims on an as-needed basis — not to mention avoiding insurance company taxes, fees, and administrative costs.
Unused funds can be rolled over to the next year or reallocated to budgetary priorities. Your credit union can also earn interest on funds in the trust, further reducing expenses.
Self-insurance lets the employer stay in control of coverage and costs. Credit unions can evaluate the unique needs of their employees, choose features and benefits that fit their budgets, determine the amount of coverage necessary and pay only for actual claims. They also have the freedom to contract with the providers or networks that work best for their employees.
To learn more about how we can help your credit union develop a better benefits program — freeing up money to allocate elsewhere in your budget — schedule a consultation with us today.